PT Vale Indonesia Tbk. (INCO) is seeking a loan of USD 1.2 billion to kick-start a new mining block development project next year.
This move to secure funding through a bank loan follows a credit rating upgrade from S&P Global Ratings, which raised INCO's rating to BB+ with a stable outlook, up from BB earlier this month.
"For the loan, it is currently in process, and the BB+ credit rating upgrade from S&P Global Ratings is a significant boost to our credibility," said INCO's Head of Corporate Communications, Vanda Kusumaningrum, when contacted on Wednesday (Dec 18, 2024).
Vanda mentioned that the company has been developing three new mines in the Pomalaa, Morowali, and Sorowako blocks.
According to INCO's data, the mining development project in Morowali is expected to be completed in Q4 2025, with an additional production capacity of 3.84 million tons of saprolite per year.
By the end of this year, the Morowali mining development project, with a capital expenditure of USD 399 million, has reached 35% completion.
Next, INCO is also pursuing the development of a new mining block in Pomalaa, which is expected to add an annual production of 28.15 million tons of saprolite and limonite.
The capital expenditure for this new mining block is USD 1 billion, with operations expected to begin in Q2 2026. The Pomalaa mining project is currently 22% complete.
Meanwhile, the new mining block in Sorowako requires an investment of about USD 257 million, with an expected additional annual production of 11.5 million tons of limonite. This project is expected to be completed by Q3 2026.
"Considering the large investment value, loans are one of the ways PT Vale is financing these mining development projects," said the company.
As previously reported, INCO recorded a significant decline in net profit from January to September 2024, falling to USD 51.1 million.
This decline was primarily due to lower revenue as a result of the drop in average nickel selling prices.
According to its financial report as of September 30, 2024, INCO's net profit for the first nine months of 2024 dropped 78.55% year-on-year (YoY) from USD 238.27 million in the same period of 2023. The sharp decline in net profit was in line with the decrease in INCO's revenue by the end of September 2024.
INCO's revenue fell by 24.45% YoY to US$708.5 million from US$937.8 million in the same period last year.
This revenue was mainly driven by sales to Vale Canada Limited (VCL) and Sumitomo Metal Mining Co. Ltd. (SMM), both of which are related parties. Sales to VCL reached USD 562.9 million by the end of September, while sales to SMM totaled USD 145.65 million.
Rizky Putra, Chief Financial Officer of Vale Indonesia, explained that the company has faced challenges, particularly due to the continued decline in nickel prices through Q3 2024.
"This decrease was mainly caused by lower realized prices of nickel matte, along with a one-time effect from the maintenance of the coal grinding facility in September, which led to higher consumption of HSFO to replace coal usage," Rizky said in an official statement on Thursday (Oct 31, 2024).
INCO reported an average realized price of USD 13,262 per ton for the first nine months of 2024, which was 29% lower than USD 18,596 per ton in the same period of 2023.
At the same time, INCO's nickel production volume increased by 6% YoY from 51,644 tons to 52,783 tons. Similarly, the company's sales volume reached 53,429 tons, a 5.93% YoY increase from 50,435 tons in January-September 2023.
